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What’s the Password? Nuclear Seeks Admission to the RPS Club

Posted by Ben Inskeep on 04.04.2017

If there were an award for the policy that has spurred the most renewable energy across the United States, Renewable Portfolio Standards (RPS) would be a top contender. Due to their success, these policies have often been a target of both envy and animus among policymakers—and the source of serious political wrangling.

Twenty-nine states have adopted RPS policies that require utilities and electric suppliers to source a portion of electricity delivered to customers from renewables. These standards have yielded thousands of megawatts of renewables over the last three decades.

U.S. states continue to adapt their RPS policies as electricity markets and policy goals evolve. As of March 30, EQ Research is tracking 144 RPS bills and bill drafts in 25 state legislatures legislatures – with more added every week – as part of our Policy Vista™ research services.

Some of these bills would make relatively minor revisions to RPS rules or procedures, tinker with resource eligibility, or adjust reporting requirements.Other changes are more significant, including revisions to annual renewable percentage obligations or the final target of an RPS policy. EQ Research closely tracks all revisions, both large and small, through its RPS Navigator™, which provides extensive details on current RPS policies in states with competitive retail electricity markets.

One of the most interesting current themes that could impact RPS policies is the debate over the best method for reducing greenhouse gas emissions from the electricity sector. Simply put, should governments be pushing for 100% renewable energy, or should a low-carbon energy future include other resources, such as nuclear energy? Depending where states land on this issue, RPS policies could either move towards higher renewables requirements – as high as 100% – or be broadened to include non-renewable resources such as nuclear energy. (Footnote: EQ Research recently co-authored a comprehensive analysis that provides a pathway for Pennsylvania to meet 100% of its energy needs through wind, water and solar.)

Nuclear: Clean Energy or Aging Industry Seeking Subsidies? Across the U.S., aging nuclear plants, especially those in competitive wholesale electricity markets, are struggling to compete with cheap natural gas. This, in turn, has driven a number of facilities into early retirement and threatened the near-term financial viability of others. In recent years, decommissioning began for nuclear power plants in California, Wisconsin, Vermont and Nebraska, and a slew of other plants are headed for early retirements.

Hoping to stave off more nuclear retirements, nuclear proponents have recently attempted to garner support for expanding state RPS frameworks to include nuclear generation. Rather than earning renewable energy credits (RECs), as renewables do, nuclear facilities would earn “zero-emission credits” (ZECs).

So far, New York and Illinois have adopted schemes to establish ZECs. In August 2016, the New York Public Service Commission adopted as a successor to its RPS policy a Clean Energy Standard, which includes a renewables target of 50% by 2030 and requires utilities and electric suppliers to purchase the ZECs from three nuclear power plants for 12 years.

Illinois passed legislation in December that includes $235 million in annual financial support to keep 2,800 MW of nuclear capacity online. The 500-plus-page bill also championed a host of renewables programs, including maintaining retail net metering, opening community solar programs, and fixing the state’s RPS to provide long-term procurements of RECs that will give developers certainty when investing in projects.

The efforts of New York and Illinois to provide financial support mechanisms through ZECs have emboldened nuclear proponents in other states. Lawmakers in Connecticut, New Jersey, New Mexico, Ohio and Pennsylvania are now considering similar proposals.

Legislation introduced in New Jersey takes a deliberative approach by requiring the study of ZECs rather than immediately implementing any subsidies. Connecticut adopts the same technique used by New York and Illinois to make nuclear subsidies more palatable – namely, by pairing them with an enhanced RPS policy. SB 106 would support the Millstone Nuclear Power Station while doubling the existing RPS requirements (currently maxing out at 20% by 2020) to achieve 40% by 2040.

FirstEnergy is looking to shore up legislative support for its nuclear power plants in both Pennsylvania and Ohio. It has promised to close the 1,800 MW Beaver Valley nuclear plant in Pennsylvania in 2018 if support is not provided, sparking several lawmakers to form a nuclear energy caucus in October 2016. Legislation designed to keep FirstEnergy’s two Ohio nuclear power plants running is expected to be introduced later this year, but only after another attempt by the legislature to pass legislation making compliance with the exiting RPS voluntary.

Finally, introduced legislation in New Mexico would avoid the complexity of creating a new ZEC scheme by making nuclear an eligible resource under the existing RPS. Without an increase to the RPS requirements, however, this method shifts support from new renewables to existing nuclear.

Accelerating Renewable Energy Targets While some states are mulling nuclear support, others seem poised to move in the direction of 100% renewables. Hawaii, which remains dependent on imported diesel for much of its electric generation, has committed to weening itself completely off fossil fuels by 2045 and became first state with a 100% renewables goal. Not to be outdone, lawmakers in California, Massachusetts, and even North Carolina have introduced similar legislation in 2017.

While 100% RPS policies are only now beginning to generate serious political attention, ratcheting up renewables requirements has been a prominent trend in state RPS legislation for several years. Six jurisdictions strengthened their RPS standards in recent years to require at least 50% renewables. And legislation currently pending in at least seven additional states would do the same.

On the other hand, legislation aimed at rolling back state RPS policies has continuously failed across the country. Recent success in Illinois and Michigan to strengthen RPS policies, coupled with a 2016 gubernatorial veto of legislation to repeal Ohio’s RPS requirements, are among the latest examples of these trends.

Contact us if you are interested in learning more about our RPS Navigator™ service.